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Helpful Hints on Maximizing Your Charitable IRS Deductions

Charitable giving is always a good thing to do as most people want to help others who are less fortunate than themselves. It is always good to be aware of as many hints as possible when it comes to maximizing your charitable IRS deductions.

Are you aware of what it means when a charitable organization says that they are tax-exempt? Most people assume that this means that contributions to the charity are automatically exempt from being taxed but this is not always the case. Tax-exempt simply means that the charity is not required to pay any income taxes on the federal level while tax-deductible on the other hand means that the donor is able to deduct contributions that he or she makes to the charitable organization in question. The Internal Revenue Code shows that there are 20 different categories or more of organizations that are deemed tax-exempt but on the other hand very few of these provide tax deductions for any of the donations they take in.

The majority of charities that are very high profile and are mainstream provide tax deductions for donations made while there are some other mainstream and well-known charities that do not allow for this. If you want to make a donation to a tax-exempt charitable organization but one of the factors that plays in your decision making process is whether or not the money you donate will be tax deductible then you will need to do some research to find out if the organization does indeed qualify for tax deductions. This is most likely going to be more of a concern for individuals who wish to make a large cash donation. The IRS publishes a list called the Cumulative List of Organizations on a yearly basis, which clearly states which charities are eligible for tax deductions. If this is a concern of yours when it comes to charitable giving then you might want to take a look at this list. Another option is to go directly to the source and call the IRS to speak to a representative.

While a charity may qualify for tax deductions, charitable donations are often not what taxpayers expect they are going to be. For example if you buy a product and a proceeds of the money goes to a charity or you attend a charity gala or event, you are not eligible to deduct the complete price for what you paid but only the portion that is “above the fair market value” of the product or service you paid for. To give a concrete example, if you spend $599 for a charity dinner but it is only worth $200, then you are only able to deduct $300 when you do your taxes.

Contributions to charities are only considered deductible for the calendar year in which they are delivered and/or paid and pledge are not considered eligible for tax deductions until the point at which they are paid. Getting receipts for charitable giving is essential if you wish to claim it on your taxes. This is absolutely necessary if the donation is worth $250 or more. If you have no receipt then you will not be able to use it as a tax deduction.

Be aware that money you give to people in need is very heartwarming but it cannot be used as a tax deduction. Contributions that is eligible, as deductions must be made directly to a charitable organization such as the American Lung Association, the American Cancer Society etc.

Planned or deferred charitable giving is another way to maximize your IRS deductions. What this means is that you make a commitment today to make a donation at some point in the future, whether it be sometime during the remainder of your lifetime or be it a donation that is noted in your will. Charitable donations that are included in your will will help to significantly decrease the amount of tax that must be made on your estate after your death.